February 23rd, 2022

The Central Bank of Kenya (CBK) today launched the National Payments Strategy 2022 – 2025, marking a major milestone in Kenya’s payments journey.

Kenya’s payments journey has been marked by significant developments and achievements over the years, making Kenya a world-renowned leader and trailblazer in the digital payments and innovation space. From the establishment of the first two ATMs in 1989, Kenya’s payments landscape has undergone a significant transformation in pace with Kenya’s economic transformation. Key highlights of this journey include the implementation of the Kenya Electronic Payment and Settlement System (KEPSS) in 2005, the launch of mobile money in 2007, the enactment of the National Payments System (NPS) Act in 2011 and the underlying regulations in 2014, the authorisation of a real-time bank account-to-bank account payment system (PesaLink) in 2020, amongst others. The foundations established enabled Kenya to maintain economic activity at the advent of the COVID-19 pandemic, with mobile payments facilitating remote day-to-day transactions for households and enterprises while reducing social contact.

The launch of the NPS strategy today marks a significant step in this journey. It signals that Kenya’s payments journey is far from finished and enshrines our collective aspirations to build on the strong foundations already established to take Kenya to the next frontier.

The vision of the Strategy is to have “a secure, fast, efficient and collaborative payments system that supports financial inclusion and innovations that benefit Kenyans”. The realisation of this ambitious vision will be achieved by pursuing the following strategic objectives under the leadership of CBK, working with and through other partners:

• To support a payments system that meets the diverse needs of customers, especially with respect to financial inclusion and shared prosperity
• To enhance the safety and security of the payments system through the adoption of relevant industry and global standards
• To support an ecosystem that is anchored on collaboration, that produces customer-centric and world-leading innovations, and
• To create a supportive policy, legal and regulatory framework that is robustly enforced across existing and emerging players in the payments ecosystem.

The strategy is built around five core principles:  trust, security, usefulness, choice and innovation.

The intangibility of finance, including payments, means that trust plays a central role in the adoption and usage of payment instruments and channels. The strategy aims to ensure that payments will be made and received in a timely and reliable manner.

The second pillar, security, aims at creating a resilient system that safeguards all payment users and channels in an increasingly digital world. Threats related to issues of cyber security, data privacy and consumer protection, have become a growing concern as payments become increasingly digitized.

Speed, ease of use, accessibility and affordability are leading contributors to the usefulness of payments, the third pillar. A useful payment system is one that meets the diverse and unique needs of all users of the payments system.

The fourth and fifth pillars, choice and innovation are closely intertwined. Choice means that users have the ability to make payments from and to any payment instrument or channel, regardless of the provider, with no friction and at the minimum cost possible. To achieve this, the payments system must continuously innovate to keep pace with changing needs and preferences. However, it is not simply about churning new products but ensuring that they are value adding and are useful to the users. Innovation is also key in ensuring that Kenya retains its global leadership in payments and at the same time ensuring that businesses, small and large, continue to participate in the global marketplace.

The strategy will not be implemented within a vacuum. Rather, it fits within a kaleidoscope of other Government-led initiatives aimed at leveraging technology to transform Kenya’s economy. This includes the implementation of the the Digital Economy Blueprint and Strategy that provides a framework for developing a sustainable and inclusive digital economy, the Digital Finance Policy Framework, the digitization of government services including payments, the development of an enabling and conducive framework for data privacy and protection, amongst others.

The strategy has been launched at a pivotal point, in the midst of opportunities and challenges. Mobile phone penetration currently stands at 92.2%. The use of internet, while still low relative to global standards, is growing. Current internet access and usage stands at 38.2%. The vibrancy and dynamism of Kenya’s payments landscape is attracting new players, including global ones. All this is driven by a youthful population of fast technology adopters, with 57% of the population aged between 18-35 years. At the same time, the Covid-19 pandemic has turned livelihoods and economies belly up, re-ordering how the world trades, learns, work, live and so on. As the world changes, so must payments.

As these and other external drivers mount and exert added pressure on the system to continue to evolve, there is a critical need for the system to appropriately respond. The strategy outlines several initiatives for implementation that respond to these dynamics. Highlights include:

• Ensuring implementation of full interoperability in the payments industry – this will promote and strengthen the digitalisation of all payment channels
• Reviewing the existing legal and regulatory framework.
• Promoting adoption by the payments industry of best international standards
• Promoting the roll out of the new Real Time Gross Settlement (RTGS) System enhanced features in line with the wider government’s agenda of a fully digitised and 24/7 economy for Kenya
• Implementing a further cheque value-capping policy and progressively exploring the possibility and merits of phasing-out of cheques in future.
• Continuing the promotion of the integration of regional and Pan African payments
• Continuing the exploration of the usefulness of new forms of digital money and their use cases for Kenya e.g., Central Bank Digital Currency (CBDC).

To paraphrase the words of the Governor of the Central Bank of Kenya during the launch, ‘in a football match, it is helpful for the players to know where the goal is and where to score’. In keeping with this analogy, these initiatives are the passes, tackles, crosses and tactics that will take Kenya to the next frontier of payments, the goal. With the launch, the hard work now beings.

Relevant links:

1. National Payments Strategy – 2022 to 2025
2. Central Bank Digital Currency (CBDC) discussion paper
3. CBK Governor’s remarks a the launch of the National Payment Strategy 2022-2025
4. FSD Kenya CEO’s remarks at the launch of Kenya’s National Payments Strategy 2022 – 2025
5. Presentation of the National Payments Strategy 

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